Rain Will Determine 2013 Farmland Values

For the past several years farmland values have shot steadily up, but 2013 could be a different story.

In 2012, the average value of Iowa farmland reached $8,296 per acre, an increase of 23.7% from 2011, according to the Iowa Land Value Survey. That historic value level secured the third year in a row where values increased more than 15%.

A recent Farm Journal Pulse asked: What are your expectations for farmland values during 2013? Almost half of the 1,500 respondents expect farmland values to stay the same, while 34% expect them to increase. Less than 20% expect values to decrease.

Steve Bruere is president of Peoples Company, a real estate brokerage based in West Des Moines, Iowa, which manages farms and sells farms. The company is licensed in Iowa, Illinois, Minnesota, Nebraska, Missouri and Montana.

He says the land market continues to be bullish. "We’ve seen really a 50% in land values over the past couple years."

Supplies are tight for farmland, he says, but the big wild card for 2013 will be precipitation. "The weather will dictate what happens to land values next year. We’ll have the world’s largest crop planted in 2013. If we have timely rains, commodity prices will go south and that will have a negative impact on values. If we have another short crop, then land values could continue their ride up."

At the Auctions

Bruere says the steady returns on farmland values have definitely caught investors’ eyes. "More investors are interested in investing in land than ever before. But, farmers are the predominant buyers of farmland right now, they are outbidding the investors." He says in 2012, 90% of Peoples Company’s transactions were with farmers.

Related Audio Report

Can these high land prices pencil out for farmers? Iowa farmer and margins expert Chris Barron answers those questions in a Straight from the Heartland segment.